Headline index Nifty opened on a positive note and got even stronger as the day progressed. The index stayed in a one-way rising trajectory and kept marking incremental highs throughout the day. There were no signs of any
selloff at higher levels. Volatility also subsided significantly along with the up move. Nifty ended the day with a net gain of 239.85 points, or 1.68 per cent.
As evident from the charts, Nifty is creating basing points following each modest corrective move. From a technical perspective, the up move in this session has now defined the zone of the current consolidation area. Unless the high point of 14,653 is taken out, the index has formed a large consolidation area for itself between 14,220-14,650 levels. Volatility declined sharply as India VIX came off by 6.14 per cent to 22.8975. As long as Nifty stays below 14,650 and above 14,200, it will continue to stay in this broad and defined consolidation zone.
Since the market ended near its high point, there are chances of Nifty seeing a modestly positive start to the day. The levels of 14,570 and 14,650 will act as immediate resistance points, while support will come in at 14,460 and 14,400 levels.
The Relative Strength Index (RSI) on the daily chart is 68.75; it remains neutral and does not show any divergence against price. The daily MACD is bearish as it trades below the Signal Line. A reasonably large white candle emerged on the charts; this indicates a directional consensus among market participants.
If we look at the options data, the level of 14,400 saw maximum amount of Put writing during the day. Following this behavior, this level now holds highest concentration of Put Open Interest for this week’s expiry. This means the market may find strong support at this point for the next two days unless there is any major tactical shift in the trade
setup. We recommend avoiding shorts. New long positions, if any, should be taken on a highly selective note. While vigilantly protecting profits at higher levels, a continued cautious outlook is advised for the day.
(Milan Vaishnav, CMT, MSTA, is a Consulting Technical Analyst and founder of Gemstone Equity Research & Advisory Services, Vadodara. He can be reached at firstname.lastname@example.org)